Fine imposed on Cablevision and Multicanal for collusive behavior

On June 17, 2010, the Secretary of Domestic Trade (the “Secretary”) imposed a fine on the two major cable TV companies in Argentina, namely Cablevisión S.A. (“Cablevisión”) and Multicanal S.A. (“Multicanal”, jointly with Cablevisión, the “Companies”), by means of Resolution No. 219 of June 17, 2010 (the “Resolution”). The Resolution was based on Opinion No. 618, issued by the National Commission for the Defense of Competition (“Antitrust Commission”) on June 15, 2010 (the “Opinion”). 

The Antitrust Commission alleged that the Companies performed an anticompetitive behavior that consisted in an agreement to divide between them the cable TV market in the city of Santa Fe and recommended the Secretary to impose a fine of AR$ 2,500,000 to each company.

The investigation was initiated on August 12, 1998, pursuant to a complaint filed before the Antitrust Commission by Consumer Action (Acción del Consumidor, “ADELCO”) an association whose purpose is to protect the rights and interests of consumers. 

ADELCO alleged that the Companies performed an anticompetitive behavior that consisted on establishing an agreement to divide the cable TV market of the city of Santa Fe between them. Said conduct would have been performed as from the acquisition of the 50% of Video Cable Comunicaciones S.A. (“VCC”) and Cablevideo S.A. (“Cablevideo”) by each of the Companies. 

After the acquisition of VCC and Cablevideo, the Companies executed a split-off process to separate the assets of VCC and Cablevideo in the city of Santa Fe among them. They performed a geographical division of the areas that were covered by the networks of VCC and Cablevideo, eliminating the overlapping that previously existed. 

In order to analyze the alleged anticompetitive conduct, the Antitrust Commission analyzed the competitive situation that was evidenced in the city of Santa Fe before and after the acquisition of VCC and Cablevideo by the Companies.

According to the findings of the Antitrust Commission, before the acquisition there was direct competition between VCC and Cablevideo since there was an overlapping of networks in certain areas of the City of Santa Fe that permitted the customers to choose between those two cable TV providers. 

After the acquisitions and split-off of VCC and Cablevideo, the competitive environment that existed before and the possibilities of the customers to choose their cable TV provider were eliminated.

The Antitrust Commission concluded that the process by means of which the Companies decided to split-off the assets of VCC and Cablevideo implied a restriction to competition. This assertion was supported by the fact that before the split-off, VCC and Cablevideo were independent companies that competed between them since they had overlapping networks in the city of Santa Fe. It stated that, by means of the split-off process, the Companies established a clear geographic division eliminating; therefore, direct competition between them.

After concluding that the conduct implied a restriction to competition, the Antitrust Commission assessed whether the general economic interest was affected. It stated that the harm to the general economic interest should be assessed considering the harm that the consumers have suffered and not the potential profits that the Companies could have obtained as a consequence of the behavior.

The Antitrust Commission pointed out that a collusive conduct that implied a geographical division of the market affects the general economic interest since it reduces the consumer’s surplus by artificially manipulating the offer with the object of reducing the goods that are being consumed and increasing prices, situation that was not evidenced before the anticompetitive conduct was performed.

The agency stated that the fines to be imposed to the Companies should compensate the damages caused. It recommended the imposition of a fine of AR$ 2,500,000 to each company. In order to calculate the amount of the fine, the Antitrust Commission took into account, among other factors, the subscription price for cable TV services and the number of customers that enjoyed cable TV service in the city of Santa Fe.

Please note that over 12 years have passed since the Antitrust Commission started the investigation on this case. It is very important to try to speed up investigations in order to procure a more efficient protection of competition. In order to do so, it would be advisable to provide the Antitrust Commission with more professionals and a higher budget.

It should be taken into account that this resolution could be appealed before the Court of Appeals.